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UScellular reports third quarter 2022 results

November, 03, 2022

CHICAGO, Nov. 3, 2022 /PRNewswire/ --

As previously announced, UScellular will hold a teleconference on November 4, 2022, at 9:00 a.m. CDT. Listen to the call live via the Events & Presentations page of investors.uscellular.com.

United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,083 million for the third quarter of 2022, versus $1,016 million for the same period one year ago. Service revenues totaled $781 million, versus $788 million for the same period one year ago. Net income (loss) attributable to UScellular shareholders and related diluted earnings (loss) per share were $(12) million and $(0.15), respectively, for the third quarter of 2022 compared to $34 million and $0.38, respectively, in the same period one year ago.

"While postpaid subscriber growth remains challenging, we are intensely focused on changing the trajectory," said Laurent Therivel, UScellular President and CEO. "I am encouraged that recent offers are beginning to generate significant upgrade volumes which should have a positive impact on churn in future periods.

"UScellular continues to make progress on its long-term strategic priorities while reporting another strong quarter of ARPU growth.  And we are seeing continued momentum in a number of growth areas of the business, including our tower portfolio and fixed wireless.

"I'm impressed with the hard work of our associates and their commitment to keeping our customers connected. I'd like to thank all of them for their contributions this quarter."

2022 Estimated Results

UScellular's current estimates of full-year 2022 results are shown below. Such estimates represent management's view as of November 3, 2022 and should not be assumed to be current as of any future date. UScellular undertakes no duty to update such estimates, whether as a result of new information, future events, or otherwise. There can be no assurance that final results will not differ materially from estimated results.


2022 Estimated Results


Previous

Current

(Dollars in millions)



Service revenues

$3,100-$3,200

$3,100-$3,150

Adjusted OIBDA1

$750-$900

$750-$825

Adjusted EBITDA1

$925-$1,075

$925-$1,000

Capital expenditures

$700-$800

Unchanged

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income or Income before income taxes. In providing 2022 estimated results, UScellular has not completed the below reconciliation to Net income because it does not provide guidance for income taxes. Although potentially significant, UScellular believes that the impact of income taxes cannot be reasonably predicted; therefore, UScellular is unable to provide such guidance.




Actual Results


2022 Estimated
Results


Nine Months Ended

September 30, 2022


Year Ended
December 31, 2021

(Dollars in millions)






Net income (GAAP)

N/A


$                                 62


$                               160

Add back:






Income tax expense

N/A


46


20

Income before income taxes (GAAP)

$45-$120


$                               108


$                               180

Add back:






Interest expense

160


115


175

Depreciation, amortization and accretion expense

705


520


678

EBITDA (Non-GAAP)1

$910-$985


$                               743


$                           1,033

Add back or deduct:






Loss on impairment of licenses


3


(Gain) loss on asset disposals, net

15


9


23

(Gain) loss on sale of business and other exit costs, net


(1)


(2)

Adjusted EBITDA (Non-GAAP)1

$925-$1,000


$                               754


$                           1,054

Deduct:






Equity in earnings of unconsolidated entities

170


122


179

Interest and dividend income

5


5


6

Adjusted OIBDA (Non-GAAP)1

$750-$825


$                               627


$                               869



1     

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. UScellular does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of UScellular's operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of UScellular's financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for September 30, 2022, can be found on UScellular's website at investors.uscellular.com.

Stock Repurchase

During the third quarter of 2022, UScellular repurchased 352,635 of its Common Shares for $10 million.

Conference Call Information

UScellular will hold a conference call on November 4, 2022 at 9:00 a.m. Central Time.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.uscellular.com. The call will be archived on the Events & Presentations page of investors.uscellular.com.

About UScellular

United States Cellular Corporation provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to customers with 4.8 million retail connections in 21 states. The Chicago-based company had 4,900 full- and part-time associates as of September 30, 2022. At the end of the third quarter of 2022, Telephone and Data Systems, Inc. owned 83 percent of UScellular. For more information about UScellular, visit uscellular.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:  All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: intense competition; the ability to attract people of outstanding talent throughout all levels of the organization; UScellular's smaller scale relative to larger competitors; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the ability to obtain access to adequate radio spectrum to meet current or anticipated future needs, including participation in FCC auctions; changes in demand, consumer preferences and perceptions, price competition, or churn rates; advances in technology; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of UScellular's businesses; the ability of the company to successfully construct and manage its networks; uncertainties in UScellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on UScellular indebtedness or comply with the terms of debt covenants; conditions in the U.S. telecommunications industry; the value of assets and investments; the state and federal regulatory environment; pending and future litigation; cyber-attacks or other breaches of network or information technology security; potential conflicts of interests between TDS and UScellular; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; the impact, duration and severity of public health emergencies, such as the COVID-19 pandemic. Investors are encouraged to consider these and other risks and uncertainties that are more fully described under "Risk Factors" in the most recent filing of UScellular's Form 10-K, as updated by any UScellular Form 10-Q filed subsequent to such Form 10-K.

For more information about UScellular, visit: www.uscellular.com

 

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

9/30/2022


6/30/2022


3/31/2022


12/31/2021


9/30/2021

Retail Connections










Postpaid










Total at end of period

4,264,000


4,296,000


4,335,000


4,380,000


4,391,000

Gross additions

151,000


128,000


126,000


165,000


145,000

Feature phones

5,000


4,000


2,000


3,000


2,000

Smartphones

102,000


90,000


89,000


122,000


103,000

Connected devices

44,000


34,000


35,000


40,000


40,000

Net additions (losses)

(31,000)


(40,000)


(44,000)


(12,000)


(8,000)

Feature phones

(6,000)


(8,000)


(10,000)


(7,000)


(7,000)

Smartphones

(16,000)


(23,000)


(26,000)


5,000


2,000

Connected devices

(9,000)


(9,000)


(8,000)


(10,000)


(3,000)

ARPU1,2

$        50.21


$        50.07


$        49.71


$         48.62


$         48.12

ARPA1,3

$      130.27


$      130.43


$      129.93


$       127.14


$       125.99

Churn rate4

1.42 %


1.30 %


1.30 %


1.35 %


1.15 %

Handsets

1.15 %


1.10 %


1.10 %


1.10 %


0.95 %

Connected devices

3.40 %


2.73 %


2.70 %


3.08 %


2.59 %

Prepaid










Total at end of period

493,000


490,000


495,000


513,000


518,000

Gross additions

62,000


56,000


55,000


63,000


74,000

Net additions (losses)

2,000


(4,000)


(18,000)


(5,000)


11,000

ARPU2

$        35.04


$        35.25


$        34.59


$         34.53


$         35.05

Churn rate4

4.07 %


4.07 %


4.84 %


4.39 %


4.09 %

Market penetration at end of period










Consolidated operating population

32,370,000


32,370,000


32,370,000


32,127,000


31,865,000

Consolidated operating penetration5

15 %


15 %


15 %


15 %


16 %

Capital expenditures (millions)

$            136


$           268


$           137


$            321


$            185

Total cell sites in service

6,933


6,916


6,899


6,898


6,857

Owned towers

4,329


4,323


4,310


4,301


4,274



1 

Q3 2021 Postpaid ARPU and ARPA amounts exclude $9 million of postpaid revenue related to an out-of-period error recorded in that quarter.

2     

Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:


•       Postpaid ARPU consists of total postpaid service revenues and postpaid connections.


•       Prepaid ARPU consists of total prepaid service revenues and prepaid connections.

3   

Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.

4     

Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.

5     

Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total estimated population of consolidated operating markets. 

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

(Unaudited)






Three Months Ended

September 30,


Nine Months Ended

September 30,


2022


2021


2022

vs. 2021


2022


2021


2022

vs. 2021

(Dollars and shares in millions, except per share amounts)












Operating revenues












Service1

$      781


$      788


(1) %


$  2,351


$  2,333


1 %

Equipment sales

302


228


32 %


769


720


7 %

Total operating revenues

1,083


1,016


7 %


3,120


3,053


2 %













Operating expenses












System operations (excluding Depreciation, amortization and
accretion reported below)

197


205


(4) %


574


594


(3) %

Cost of equipment sold

354


252


40 %


887


786


13 %

Selling, general and administrative

369


346


7 %


1,032


984


5 %

Depreciation, amortization and accretion

177


160


10 %


520


510


2 %

Loss on impairment of licenses




3



N/M

(Gain) loss on asset disposals, net

1


8


(89) %


9


15


(43) %

(Gain) loss on sale of business and other exit costs, net



8 %


(1)


(1)


40 %

Total operating expenses

1,098


971


13 %


3,024


2,888


5 %













Operating income (loss)

(15)


45


N/M


96


165


(42) %













Investment and other income (expense)












Equity in earnings of unconsolidated entities

40


48


(17) %


122


137


(11) %

Interest and dividend income

2


1


37 %


5


5


11 %

Interest expense

(42)


(45)


6 %


(115)


(144)


20 %

Total investment and other income (expense)


4


N/M


12


(2)


N/M













Income (loss) before income taxes

(15)


49


N/M


108


163


(34) %

Income tax expense (benefit)

(3)


14


N/M


46


31


48 %

Net income (loss)

(12)


35


N/M


62


132


(53) %

Less: Net income attributable to noncontrolling interests, net of tax


1


(38) %


4


4


12 %

Net income (loss) attributable to UScellular shareholders

$      (12)


$        34


N/M


$        58


$      128


(55) %













Basic weighted average shares outstanding

85


86


(1) %


86


87


(1) %

Basic earnings (loss) per share attributable to UScellular shareholders

$   (0.15)


$    0.39


N/M


$    0.68


$    1.48


(54) %













Diluted weighted average shares outstanding

85


87


(2) %


87


88


(1) %

Diluted earnings (loss) per share attributable to UScellular shareholders

$   (0.15)


$    0.38


N/M


$    0.67


$    1.46


(54) %


N/M - Percentage change not meaningful



1   

During the three months ended September 30, 2021, UScellular recorded a $9 million out-of-period error, which increased Service revenue by $9 million for the three and nine months ended September 30, 2021. 

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)


Nine Months Ended

September 30,


2022


2021

(Dollars in millions)




Cash flows from operating activities




Net income

$                     62


$                   132

Add (deduct) adjustments to reconcile net income to net cash flows from operating activities




Depreciation, amortization and accretion

520


510

Bad debts expense

93


34

Stock-based compensation expense

18


20

Deferred income taxes, net

31


47

Equity in earnings of unconsolidated entities

(122)


(137)

Distributions from unconsolidated entities

100


106

Loss on impairment of licenses

3


(Gain) loss on asset disposals, net

9


15

(Gain) loss on sale of business and other exit costs, net

(1)


(1)

Other operating activities

6


31

Changes in assets and liabilities from operations




Accounts receivable

(54)


19

Equipment installment plans receivable

(131)


(44)

Inventory

(71)


10

Accounts payable

(7)


(33)

Customer deposits and deferred revenues

27


10

Accrued taxes

134


(36)

Accrued interest

10


7

Other assets and liabilities

25


(23)

Net cash provided by operating activities

652


667





Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(409)


(456)

Cash paid for licenses

(575)


(1,263)

Cash received from investments


3

Cash received from divestitures and exchanges

8


2

Advance payments for license acquisitions


(20)

Other investing activities


2

Net cash used in investing activities

(976)


(1,732)





Cash flows from financing activities




Issuance of long-term debt

725


1,217

Repayment of long-term debt

(327)


(1,117)

Issuance of short-term debt

110


Repayment of short-term debt

(50)


Common Shares reissued for benefit plans, net of tax payments

(5)


(16)

Repurchase of Common Shares

(28)


(21)

Payment of debt issuance costs

(1)


(20)

Distributions to noncontrolling interests

(3)


(2)

Other financing activities

(7)


(4)

Net cash provided by financing activities

414


37





Net increase (decrease) in cash, cash equivalents and restricted cash

90


(1,028)





Cash, cash equivalents and restricted cash




Beginning of period

199


1,291

End of period

$                   289


$                   263

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS






September 30, 2022


December 31, 2021

(Dollars in millions)




Current assets




Cash and cash equivalents

$                                254


$                                156

Accounts receivable, net

1,075


1,046

Inventory, net

243


173

Prepaid expenses

61


58

Income taxes receivable

1


123

Other current assets

41


49

Total current assets

1,675


1,605





Assets held for sale

29


18





Licenses

4,680


4,088





Investments in unconsolidated entities

461


439





Property, plant and equipment, net

2,631


2,606





Operating lease right-of-use assets

932


959





Other assets and deferred charges

648


626





Total assets

$                          11,056


$                          10,341

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY






September 30, 2022


December 31, 2021

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$                                  11


$                                    3

Accounts payable

348


360

Customer deposits and deferred revenues

218


191

Accrued taxes

36


33

Accrued compensation

62


83

Short-term operating lease liabilities

133


129

Other current liabilities

291


104

Total current liabilities

1,099


903





Deferred liabilities and credits




Deferred income tax liability, net

705


674

Long-term operating lease liabilities

859


889

Other deferred liabilities and credits

661


573





Long-term debt, net

3,115


2,728





Noncontrolling interests with redemption features

12


11





Equity




UScellular shareholders' equity




Series A Common and Common Shares, par value $1.00 per share

88


88

Additional paid-in capital

1,696


1,678

Treasury shares

(85)


(68)

Retained earnings

2,890


2,849

Total UScellular shareholders' equity

4,589


4,547





Noncontrolling interests

16


16





Total equity

4,605


4,563





Total liabilities and equity

$                          11,056


$                          10,341

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)

 

Free Cash Flow



Three Months Ended

September 30,


Nine Months Ended

September 30,


2022


2021


2022


2021

(Dollars in millions)








Cash flows from operating activities (GAAP)

$                  73


$                304


$                652


$                667

Less: Cash paid for additions to property, plant and equipment

121


175


409


456

Free cash flow (Non-GAAP)1

$                (48)


$                129


$                243


$                211



1     

Free cash flow is a non-GAAP financial measure which UScellular believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.

 

 

Cision View original content:https://www.prnewswire.com/news-releases/uscellular-reports-third-quarter-2022-results-301668257.html

SOURCE United States Cellular Corporation

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